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Ended 2023 with approximately $862 million in cash and short-term investments

Commenced sales to Australian partner

Launched award-winning Lord Jones^® brand in Canada

Consolidated net revenue increased 9% in Q4 2023 compared to Q4 2022; on a constant currency basis consolidated net revenue increased 11% in Q4 2023 compared to Q4 2022

Net revenue in Canada increased 20% in Q4 2023 compared to Q4 2022; on a constant currency basis net revenue in Canada increased 21% in Q4 2023 compared to Q4 2022

TORONTO, Feb. 29, 2024 (GLOBE NEWSWIRE) -- Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“Cronos” or the “Company”), today announces its 2023 fourth quarter and full-year business results¹.

“In 2023, we significantly improved our cash flow from operations driven primarily by operating expense savings, while simultaneously expanding our portfolio of borderless products in Canada and Israel and entering two international markets, Germany and Australia,” said Mike Gorenstein, Chairman, President and CEO of Cronos.

“The operating expense savings combined with robust interest income and improved working capital management in the fourth quarter aided in increasing our cash balance by $22 million from the third quarter to a total cash and short-term investments balance of approximately $862 million,” continued Mr. Gorenstein. “In 2023, the Spinach^® brand became the number two overall brand in Canada, propelled by number one market share rankings in the flower and edibles categories, according to Hifyre. We continue to bring new and innovative products to market that are differentiated from the competitive set to build and maintain our leadership position in this market. We also launched the Lord Jones^® brand in the Canadian market in 2023; this new line-up of products is off to an impressive start, and we are excited to bring new category-defining products to market under this brand in 2024. In Israel, despite the war, the country has shown incredible resilience. Our team on the ground has continued to launch new products in the medical market in Israel powered by our best-in-class genetic breeding capabilities and strength in the flower category. Our teams have done excellent work over the last year to put Cronos in the best position possible to win in new markets as they become available in 2024 and beyond.”

Consolidated Financial Results

In the second quarter of 2023, the Company exited its United States ("U.S.") hemp-derived CBD operations. The exit of the U.S. operations represented a strategic shift, and as such, qualifies for reporting as discontinued operations in our condensed consolidated statements of net loss and comprehensive loss. Prior period amounts have been reclassified to reflect the discontinued operations classification of the U.S. operations.

The tables below set forth our condensed consolidated results of continuing operations, expressed in thousands of U.S. dollars for the periods presented. Our condensed consolidated financial results for these periods are not necessarily indicative of the consolidated financial results that we will achieve in future periods.

(i) Gross margin is defined as gross profit divided by net revenue.
(ii) The improvement year-over-year in quarterly net income (loss) was primarily driven by lower income tax expense, an improvement in operating loss and higher interest income.
(iii) See “Non-GAAP Measures” for more information, including a reconciliation of adjusted earnings (loss) before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) to net income (loss).
(iv) Dollar amounts are as of the last day of the period indicated.
(v) Capital expenditures represent component information of investing activities and is defined as the sum of purchase of property, plant and equipment, and purchase of intangible assets.

Fourth Quarter 2023

• Net revenue of $23.9 million in Q4 2023 increased by $1.9 million from Q4 2022. The increase year-over-year was primarily driven by higher cannabis flower sales in Canada and sales to Germany and Australia, partially offset by lower cannabis flower sales in Israel driven by the war involving Israel and Hamas (the "Israel-Hamas War") and pricing pressure as a result of competitive activity and an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue. These results were additionally impacted by the weakened Canadian dollar and New Israeli Shekel against the U.S. dollar.
• Gross profit of $1.9 million in Q4 2023 increased by $0.7 million from Q4 2022. The increase year-over-year was primarily due to higher sales in Canada, Germany and Australia. These improvements were partially offset by lower cannabis flower sales in Israel driven by the Israel-Hamas War and pricing pressure as a result of competitive activity, an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue, and the $0.1 million inventory write-down due to the decision made in Q3 2023 to wind down operations at our Winnipeg, Manitoba facility ("Cronos Fermentation").
• Adjusted EBITDA of $(14.8) million in Q4 2023 improved by $4.2 million from Q4 2022. The improvement year-over-year was primarily driven by a decrease in general and administrative and research and development expenses as part of the broader organizational cost reduction efforts.
  

Full-Year 2023

• Net revenue of $87.2 million in full-year 2023 increased by $0.5 million from full-year 2022. The increase year-over-year was primarily due to higher cannabis flower and extract sales in Canada and the initiation of sales in Germany and Australia. This increase was partially offset by lower cannabis flower sales in Israel driven by pricing pressure as a result of competitive activity, the slowdown in patient permit authorizations and the Israel-Hamas War, and an adverse price/mix in the Canadian cannabis flower category driving increased excise tax payments as a percentage of revenue. These results were additionally impacted by the weakened Canadian dollar and New Israeli Shekel against the U.S. dollar.
• Gross profit of $11.9 million in full-year 2023 decreased by $3.5 million from full-year 2022. The decrease year-over-year was primarily due to lower cannabis flower sales in Israel, an adverse price/mix on cannabis flower sales in Canada resulting in higher excise taxes as a percentage of revenue, and the $0.8 million inventory write-down recognized as a result of the decision to wind down operations at Cronos Fermentation. These results were partially offset by higher cannabis flower and extract sales in Canada.
• Adjusted EBITDA of $(61.6) million in full-year 2023 improved by $8.7 million from full-year 2022. The improvement year-over-year was primarily driven by a decrease in general and administrative and research and development expenses as part of the broader organizational cost reduction efforts.
  

Business Updates

Strategic and Organizational Update

The Company achieved $30 million in savings in 2023, overachieving its previously announced operating expense savings target of $20 to $25 million. Due to capturing operating expense savings earlier than anticipated, the Company now expects an incremental $5 to $10 million in operating expense savings in 2024, compared to the previous target of $10 to $15 million. In total, anticipated savings over the course of 2023 and 2024 remain unchanged. Savings in 2024 will be primarily driven by savings in general and administrative, and research and development. The organizational and cost savings initiatives are intended to position the Company to drive profitable and sustainable growth over time.

Cronos anticipates that the net change in cash, defined as the sum of cash and cash equivalents and short-term investments, will be positive in 2024.

The fiscal year 2024 guidance assumes: (i) a slight moderation in interest rates; (ii) limited impacts to our operations, facilities and business in Israel due to the Israel-Hamas War; (iii) limited deterioration in foreign exchange rates due to the Israel-Hamas War; (iv) the general economic conditions and regulatory environment in the markets in which Cronos participates will not materially change; (v) timely receipt of interest and principal payments on the senior secured credit facility with Cronos Growing Company Inc. (“Cronos GrowCo”); (vi) anticipated interest income of approximately $40 to 50 million in fiscal year 2024; (vii) year-over-year gross margin improvement; and (viii) meeting our revised target for reducing our operating expenses by $5 to $10 million.

Cronos continues to monitor the Israel-Hamas War and the potential impacts the conflict could have on the Company’s personnel and business in Israel and the recorded amounts of assets and liabilities related to the Company’s operations in Israel. The extent to which the Israel-Hamas War may impact the Company’s personnel, business and activities will depend on future developments which remain highly uncertain and cannot be predicted. It is possible that the recorded amounts of assets and liabilities related to the Company’s operations in Israel could change materially in the near term.

These statements are forward-looking and actual results may differ materially. Refer to “Forward-Looking Statements” below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Brand and Product Portfolio

Spinach^®
In 2023, Cronos grew the Spinach^® brand to become the second highest-ranked brand by market share in Canada, according to Hifyre, propelled by strength across the flower, edible, vape, and pre-roll categories. The Spinach^® brand continued to hold its number one market share position in the edibles category in Canada in Q4 2023, with an approximate 16.2% market share across the SOURZ by Spinach^® and Spinach FEELZ™ sub-brands, according to Hifyre. In the fourth quarter, SOURZ by Spinach^® launched its first CBD forward gummy offering, the Strawberry Kiwi 5:1 CBD | THC gummy, featuring 10 pieces per pack. Spinach continues to gain recognition as the go-to brand for a wide array of products featuring different cannabinoid combinations, potency ranges and flavor profiles.

Cronos' strong breeding program and portfolio of genetics continued to drive growth, propelling the Spinach^® brand to become the number one flower brand in Canada, with a 6.9% market share in Q4 2023, according to Hifyre. We have three SKUs in the top-15 for market share, according to Hifyre, led by our GMO Cookies genetic across various pack sizes. Our proprietary genetics breeding program continues to provide our portfolio with winning products both domestically and internationally.

The Spinach^® brand was ranked the number three vape brand in Q4 2023, holding a 7.7% market share, up from Q3 2023, when it had a 6.4% market share, according to Hifyre. Spinach^® continues to be the number one rare cannabinoid vape brand, with our SKUs that feature cannabinol (CBN), cannabigerol (CBG), and cannabichromene (CBC), holding three spots in the top five market share among rare cannabinoid vapes. We continue to develop this portfolio to bring differentiated flavor and cannabinoid combinations to market in formats consumers desire.

In Q4 2023, Spinach^® was ranked eighth in the pre-roll category, according to Hifyre. In Q4 2023, we launched Spinach Feelz™ Full Tilt Blue Razz Durban THCV pre-roll, which offers a boosted and elevated high due to its THC+THCV blend. Winning in the pre-roll category is a top priority, and we will continue to utilize our robust product development capabilities to formulate differentiated products with flavors and rare cannabinoids to win with consumers.

Lord Jones^®
In November 2023, we launched our award-winning Lord Jones^® brand in Canada. Lord Jones^® will build on its legacy of delivering premium quality cannabis products by returning to its roots with bold THC-focused innovations. The first product line to launch was Lord Jones^® Hash Fusions pre-rolls, which quickly climbed category market share ranks, according to Hifyre. Ice water hash is the most popular solventless infusion and is the second most popular infusion overall in the pre-roll category, according to Hifyre. These infused pre-rolls have been designed with an optimized ratio of ice water hash-to-flower, meticulously researched and sensory-tested to drive a smoother consumption experience and preserve the flowers' terpene-rich, bold flavors.

In January 2024, we launched a Lord Jones^® live resin vape featuring sought-after cultivars that deliver a flavorful full spectrum live resin experience. Crafted with the discerning cannabis consumer in mind, these products embody a commitment to excellence, offering an unmatched combination of curated strains, pure live resin, and elegant high-quality hardware.

In February 2024, we shipped our next ground-breaking edible innovation, this time in the chocolate category. The Lord Jones^® Chocolate Fusions edibles were researched and developed over multiple years and feature artisanal chocolate and high-quality ingredients in three flavors – cookies and cream, dazzle-berry pop, and salted caramel crunch.

PEACE NATURALS^®
In Israel, Cronos launched three new flower offerings under the Peace Naturals^® brand in the fourth quarter, Rockstar, Dancehall, and Sonic Fuel. Driven by our best-in-class genetics program and high-quality cultivation capabilities, we can meet market demands as consumers look for strain variety.

In Germany, we continue to grow distribution with our partner, Cansativa GmbH ("Cansativa"), a leading medical cannabis distributor. In the early innings of our launch, our top strains, GMO Cookies and Wedding Cake, have quickly gained popularity with medical patients, rising to leading market share positions in Germany.

Lit™
In Israel, we launched a new flower brand called Lit™. The Lit™ brand has a differentiated marketing positioning geared towards a large patient group seeking a more approachable price point while maintaining the quality that’s become synonymous with our existing products in market.

Global Supply Chain

Cronos GrowCo reported to the Company preliminary unaudited net revenue to licensed producers excluding sales to the Company in the fourth quarter and full-year 2023 of approximately $6.6 million and $19.6 million, respectively. Cronos previously provided GrowCo with a credit facility, which currently has approximately $69.8 million in principal outstanding following principal repayments of $5.6 million by GrowCo during 2023. In addition to principal repayment, Cronos also received approximately $10.3 million in interest payments from GrowCo in 2023, resulting in a total of approximately $15.9 million in cash payments to Cronos in 2023.

In December 2023, we commenced shipments of cannabis flower to our partners in Australia, Vitura Health Limited ("Vitura"), for sale in the Australian medical market. Cronos owns approximately 10% of the common shares of Vitura. Supplying the Australian market, which has grown significantly in the past three years, is an important achievement for Cronos. We look forward to providing our partners at Vitura with high-quality cannabis products.

¹ All of the financial information presented in this press release is preliminary and subject to change until the Company’s audited consolidated financial statements are filed with the U.S. Securities and Exchange Commission.

Conference Call

The Company will host a conference call and live audio webcast on Thursday, February 29, 2024, at 8:30 a.m. ET to discuss 2023 Fourth Quarter and Full-Year business results. An audio replay of the call will be archived on the Company’s website for replay. Instructions for the live audio webcast are provided on the Company's website at: https://ir.thecronosgroup.com/events-presentations.

About Cronos

Cronos is an innovative global cannabinoid company committed to building disruptive intellectual property by advancing cannabis research, technology and product development. With a passion to responsibly elevate the consumer experience, Cronos is building an iconic brand portfolio. Cronos’ diverse international brand portfolio includes Spinach^®, PEACE NATURALS^® and Lord Jones^®. For more information about Cronos and its brands, please visit: thecronosgroup.com.

Forward-Looking Statements

This press release contains information that constitutes forward-looking information and forward-looking statements within the meaning of applicable securities laws and court decisions (collectively, “Forward-Looking Statements”), which are based upon our current internal expectations, estimates, projections, assumptions and beliefs. All information that is not clearly historical in nature may constitute Forward-Looking Statements. In some cases, Forward-Looking Statements can be identified by the use of forward-looking terminology such as “expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”, “estimate” and other similar words, expressions and phrases, including negative and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen, or by discussion of strategy. Forward-Looking Statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of historical fact.

Forward-Looking Statements include, but are not limited to, statements with respect to:

• expectations related to the Israel-Hamas War and its impact on our operations in Israel, the supply of product in the market and the demand for product by medical patients in Israel, as well as any regional or global escalations to the Israel-Hamas War and its impact to global commerce and stability;
• expectations related to the German and Australian markets, including our strategic partnerships with Cansativa and Vitura, respectively, and our plans to distribute the PEACE NATURALS^® brand in Germany;
• expectations related to our announcement of cost-cutting measures, including our decision to wind-down operations at our Winnipeg, Manitoba facility and list the facility for sale, the expected costs and benefits from the wind-down of production activities at the facility, challenges and effects related thereto as well as changes in strategy, metrics, investments, costs, operating expenses, employee turnover and other changes with respect thereto;
• expectations related to the impact of our decision to exit our U.S. hemp-derived cannabinoid product operations, including the costs, expenses and write-offs associated therewith, the impact on our operations and our financial statements and any future plans to re-enter the U.S. market;
• expectations related to our announced realignment (the “Realignment”) and any progress, challenges and effects related thereto as well as changes in strategy, metrics, investments, reporting structure, costs, operating expenses, employee turnover and other changes with respect thereto;
• the timing of the change in the nature of operations at, and the announced sale-leaseback of, our facility in Stayner, Ontario (the “Peace Naturals Campus”) and the expected costs and benefits from the wind-down of certain production activities at the Peace Naturals Campus;
• our ability to complete the sale and leaseback of the Peace Naturals Campus pursuant to the agreement with Future Farmco Canada Inc.;